Proposition C: City Pension and Health Care Benefits

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League of Women Voters of California Education Fund

San Francisco County, CA

November 8, 2011 Election

Proposition C
City Pension and Health Care Benefits
City and County of San Francisco
Charter Amendment - Majority Approval Required

Pass: 129554 / 68.91% Yes votes ...... 58460 / 31.09% No votes

See Also: Index of all Propositions

Information shown below: Summary | Fiscal Impact | Arguments |

Shall the City amend its Charter to adjust pension contribution rates for most current and future City employees based on the City's costs; reduce pension benefits for future City employees; limit cost-of-living adjustments to pension benefits; decrease City contributions to retiree health care costs for certain former employees; require all current and future employees to contribute toward their retiree health care costs; change the composition and voting requirements of the Health Service Board; and make other changes to the City's retirement and health benefits systems?

Summary Prepared by San Francisco Department of Elections:
Pension Benefits: Proposition C is a Charter amendment that would change the way the City and current and future employees share in funding SFERS pension benefits. The base employee contribution rate would remain the same+7.5% for most employees+when the City contribution rate is between 11% and 12% of City payroll. Employees making at least $50,000 would pay an additional amount up to 6% of compensation when the City contribution rate is over 12% of City payroll. When the City contribution rate falls below 11%, employee contributions would be decreased proportionately.

Proposition C would require elected officials to pay the same contribution rates as City employees, and would also require the City and unions representing CalPERS members to negotiate terms of employment for employees to share costs or receive benefits comparable in value to adjustments required for SFERS employee contributions.

Proposition C would also create new retirement plans for employees hired on or after January 7, 2012, that would:

For miscellaneous employees, increase the minimum retirement age to 53 with 20 years of service or 65 with 10 years;
For safety employees, the minimum retirement age would remain at 50 with five years of service, but the age for maximum benefits would increase to 58;
For all employees, limit covered compensation, calculate final compensation from a three-year average, and change the multipliers used to calculate pension benefits, and
For miscellaneous employees, raise the age of eligibility to receive vesting allowances to 53 and reduce by half the City's contribution to vesting allowances.

Proposition C would limit cost-of-living adjustments for SFERS retirees.

Health Benefits: Proposition C would require that elected officials and employees hired on or before January 9, 2009, contribute up to 1% of compensation toward their retiree health care, with a matching contribution by the City. For employees or elected officials who left the City workforce before June 30, 2001, and retire after January 6, 2012, Proposition C requires that City contributions toward retiree health benefits remain at the same levels they were when the employee left the City workforce.

Proposition C would change the Health Service System and Health Service Board, including the following:

replace one elected member of the HSB with a member nominated by the City Controller and approved by the HSB;
change HSB's voting requirement for approving member health plans from two-thirds to a simple majority;
remove the requirement for a plan permitting the member to choose any licensed medical provider; and
allow HSB to spend money on ways to limit health care costs.

Other Measure: If the voters approve both Proposition C and Proposition D, only the measure with the most votes will become law.

Fiscal Impact from City Controller Ben Rosenfield:
City Controller Ben Rosenfield has issued the following statement on the fiscal impact of Proposition C:

Should the proposed Charter amendment be approved by the voters and implemented, in my opinion, the City's costs to fund employee retirement benefits will be reduced by approximately $40 to $50 million in fiscal year (FY) 2012+13. City costs will be reduced by approximately $1 billion to $1.3 billion cumulatively over the ten years between FY 2012+13 and FY 2021+22, of which $85 million is attributable to retiree health benefit savings, and the balance to pension contribution savings. For context, the 10-year City savings from the measure represent approximately 18%+20% of the City's projected pension plan contributions expected during that time frame. In the long term, after most City staff are subject to the new pension formulas established by this measure, City savings are projected to be approximately $100 million annually. Thesesavings projections are estimates; actual savings will depend on the future funding status of the pension fund, the size of the City's workforce, and other demographic trends. Savings estimates are provided in terms of constant FY 2011+12 dollars, and therefore control for potential impacts of inflation on future dollar values.

Approximately 60% of these savings will benefit the City's General Fund, with the balance benefiting enterprise and other special fund departments, including the Municipal Transportation Agency, Public Utilities Commission, Airport and Port. Savings will also accrue to non-City employers that participate in the San Francisco Employees' Retirement System.

Approximately $575 to $860 million of the ten-year savings would result from increased contributions by City employees earning over $24 per hour that would be required on a sliding scale when the pension system is underfunded. These estimates assume ratification of proposed safety employee labor agreement amendments currently pending before the Board of Supervisors. Approximately $355 million of savings would result from a revision to the cost-of-living increase formula for current and future pension recipients and pension plan changes for new employees hired after January 7, 2012. An additional $75 million of the savings would result from increased employee contributions to a Retiree Health Care Trust Fund beginning in FY 2016-17 that would offset retiree health insurance subsidy costs. The remaining $10 million of estimated savings would result from a change to health insurance subsidy formulas for new retirees who ended City employment prior to June 2001 with vested rights to post-retirement health benefits, to reflect formulas in place at the time they separated from the City.

Additional Costs or Savings Factors that could cause additional costs or savings include: First, to the extent that Retirement System investment returns are outside the range assumed in this analysis, both the required employer contributions and the range of savings provided by this measure would be greater or smaller. Second, projected City savings might be reduced if future labor negotiations or arbitration awards result in any salary increases to offset higher employee retirement contributions. Third, to the extent that changes to pension formulas in this measure cause employees to delay or speed up retirement dates, this could provide additional City savings or costs related to retiree pensions and health insurance subsidies. Fourth, to the extent that changes in the composition of the Health Service System Board result in changes to approved health benefit programs, costs could be higher or lower.

Nonpartisan Information

League of Women Voters

Video and Pro and Con for Prop C

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Arguments For Proposition C Arguments Against Proposition C

Consensus and $1.3 billion in savings: YES on C Prop C is the consensus plan created and passed unanimously by the Mayor and Board of Supervisors with community-wide input from city employees, business and civic leaders, legal and pension experts. Prop C is the comprehensive plan that will fix the City's broken pension and health benefit system and saves taxpayers $1.3 billion over ten years.
Only Prop C Reforms Pension AND Health Benefits Prop C is the only comprehensive plan that produces additional cost savings by reforming both pension AND health benefits for public employees.
Prop C saves taxpayers millions every year by requiring all current city employees to contribute more to their own retirement plans and by reorganizing the Health Service Board which chooses medical plans for city employees. Prop C is Fair to Our Most Vulnerable Workers Prop C is the consensus plan that ensures all city employees share the burden in bad economic times and enjoy the benefits in good times.
Prop C generates taxpayer savings by raising the retirement age, banning pension spiking once and for all, capping benefits and creating a sliding scale to determine employee contributions based on income to ensure fairness.
Vote Yes on C Written by consensus, comprehensive in scope, and fair to taxpayers and workers, Prop C saves $1.3 billion over ten years and secures a brighter future for all San Francisco families.
Mayor Ed Lee Supervisor Sean Elsbernd Supervisor John Avalos Supervisor David Campos Supervisor David Chiu Supervisor Carmen Chu Supervisor Malia Cohen Supervisor Mark Farrell Supervisor Jane Kim Supervisor Eric Mar Supervisor Ross Mirkarimi Supervisor Scott Wiener San Francisco Chamber of Commerce San Francisco Labor Council San Francisco Firefighters Local 798 San Francisco Police Officers Association Dennis Kelly, President, United Educators of San Francisco* San Francisco Planning and Urban Research (SPUR) Human Services Network

For identification purposes only; author is signing as an individual and not on behalf of an organization.

Rebuttal to Arguments For
PROPOSITION C MAKES OVERREACHING DEMANDS: Ed Lee, installed in office by City Hall "insiders" (the Board of Supervisors and powerful fundraisers Willie Brown and Rose Pack)--NOT BY SAN FRANCISCO'S VOTERS--is a free-spending Acting Mayor. Lee never met taxes he didn't love. Lee pretty much let union leaders dictate Proposition C. Lee went along with outrageous demands.
In the case of the proposed tearing down of the 1,538 Parkmerced garden apartments (passed by a fundraisers influenced bitter 6-to-5 Board of Supervisors vote and signed by the Acting Mayor), Lee allied himself with Wall Street's controversial ex-CEO of mortgage-busted Fannie Mae Daniel Mudd--the so-called "FEDERAL BILLION DOLLARS BAILOUT KING"--and his Fortress Financial Group, who now dominate Parkmerced's unpopular management.
Mudd wants to drive the garden apartments residents out of their homes so Fortress can make money raising Parkmerced's Parkmerced's population from 8,000 to 30,000 over-packed people.
Mudd wants to build massive Parkmerced tower apartments next to the San Andreas Faultline (of 1906 Earthquake and Fire fame). Mudd's Parkmerced would produce terrible traffic problems on 19th Avenue and other streets.
Lee and the unions don't care!
Vote AGAINST Proposition C. Dr. Terence Faulkner, J.D. Past Regional Citizens Forum Board Member of Association of Bay Area Governments (ABAG)*
John Michael Russom Parkmerced Resident*

For identification purposes only; author is signing as an individual and not on behalf of an organization.
PROPOSITION C HAS LOTS OF PROBLEMS:
"Marry in haste, repent at leasure" is the sad story of the politically pressured Mayors and Boards of Supervisors over the decades in dealing with the City employees unions. The situation is now worse than usual. In this case, Acting Mayor Ed Lee is running on the same November 8th, 2011 ballot with the Proposition C City employees benefits package. The unions virtually dictated a lot of the wording of Proposition C. Ed Lee didn't want to rock boats.
CANDY STORE GIVEN AWAY:
Over the years, the City employees' unions have had far better and more demanding leadership than the City and County of San Francisco. Retirement benefits are eating up the City's budget. The candy store has been given away.
Many of our Mayors and Supervisors have been weak sisters, who gave into union demands regardless of the merits in a given case.
"POISON PILL" IN PROPOSITION C: Because of the above problems, Jeff Adachi and Craig Weber's Proposition D is on the ballot as a rival to the very flawed Proposition C. An alternative is needed. "Poison pill" legal wording was added to Proposition C to prevent both Proposition D and Proposition C from being enacted. Should Propositions D and C both carry a majority of the votes (rather unlikely), only the Proposition with the HIGHEST AFFIRMATIVE VOTE would become law... and part of the City Charter. Proposition D is far from perfect as a retirement package, but it makes a bit more economic sense than union authored and lobbyed Proposition C. Vote AGAINST financially unrealistic Proposition C.
Dr. Terence Faulkner, J.D. Past Member of the State of California's Certified Farmers Market Advisory Board*

For identification purposes only; author is signing as an individual and not on behalf of an organization

Rebuttal to Arguments Against
Vote YES ON C--It's 250 pages of needed reform Across the country cities face the cruel realities of the economic downturn. There was a time when city coffers boomed and San Francisco voters improved city employees' pension benefits, but those times are behind us. Now the decision we face is which reform proposal to adopt. Prop C will save the city $1.3 billion by reforming our pension and health benefits structures, a solution crafted in conjunction with the affected parties. Alternatively, there's Prop D, which ONLY reforms pension benefits, it's incomplete and was crafted in a backroom by a politician who intends to use the issue as a platform on which to run for higher office. Proponents of D say it isn't perfect--WE AGREE Even proponents of the competing measure, Prop D, admit that it's not perfect. We agree, in fact we think it's deeply flawed. It's so poorly written that if adopted legal experts say it will get tossed out in court. If this happens San Francisco gets ZERO savings at a time when we need it most. Additionally, the competing measure only addresses pension reform. It does nothing to address San Francisco's $4 billion unfunded retiree health care obligation. Save San Francisco $1.3 billion - Vote YES ON C for the comprehensive, consensus employee benefit reform solution. Mayor Ed Lee Supervisor Sean Elsbernd Dennis Kelly, United Educators of San Francisco* San Francisco Chamber of Commerce San Francisco Labor Council San Francisco Firefighters Local 798 San Francisco Police Officers Association San Francisco Planning and Urban Research (SPUR)

For identification purposes only; author is signing as an individual and not on behalf of an organization.

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Created: January 20, 2012 12:03 PST
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